There are typically several major Chapter 11 bankruptcy cases filed each year. Perhaps not in the news as much as its founder and namesake, The Weinstein Company (“TWC”) was in the public eye in 2018 as a result of its bankruptcy filing. Here is part three of a series briefly summarizing the more interesting cases from last year:
The Weinstein Company, LLC
Founded in 2005 by brothers Harvey and Bob Weinstein after the two left Miramax Films, which they also co-founded in 1979, TWC was one of the largest film studios in North America prior to its financial problems and consequential Chapter 11 bankruptcy filing on March 19, 2018.
TWC had been in a downward spiral for several months after allegations were made by over 100 women that Harvey Weinstein had engaged in a pattern of sexual harassment, rape, and abuse. These overwhelming allegations resulted in Harvey Weinstein leaving the company, as well as a long list of civil lawsuits and a high-profile criminal case against him.
In October of 2017, New York State Attorney General Eric Schneiderman had commenced an investigation into whether TWC violated state civil rights and New York City human rights laws in the way it handled sexual harassment complaints and other types of employee discrimination. Prior to the announcement that the investor group led by Contreras-Sweet would purchase TWC, the State of New York filed a civil rights lawsuit against it.
On February 26, 2018, just a little over three weeks prior to the bankruptcy filing, TWC made an announcement that it would file for bankruptcy relief after the collapse of its deal with an investor group headed by Maria Contreras-Sweet, President Barack Obama’s former head of the Small Business Administration.
The plot thickened just a few days later on March 1 when TWC’s board and the investor group confirmed that they had, in fact, reached an agreement whereby TWC would sell all of its assets for $500 million to the group led by Contreras-Sweet. At this time, it seemed bankruptcy was no longer necessary.
However, the deal went south on March 6, not necessarily because of the civil rights lawsuit, but because it was disclosed that TWC had additional debt of $50 million. As a result of this final straw, TWC was forced to file its Chapter 11 bankruptcy case less than two weeks later on March 19, 2018.
On May 1, 2018, Lantern Capital was announced as the winner of the studio’s bankruptcy auction, and on July 16, 2018, it was announced that The Weinstein Company had shut down and its assets were sold to the newly created entity, Lantern Entertainment. The sale of the majority of the company’s assets to an affiliate of the private equity firm Lantern Capital for a diminished sale price of $289 million over the summer was approved by a Delaware bankruptcy court.
The sale included a minimum commitment from Lantern to fund at least $8.75 million for a fund for TWC’s unsecured creditors, a group that includes Harvey Weinstein’s accusers as well as actors, directors, and others who claim TWC still owes them cash for their work in the studio’s productions.
However, to many, it is unclear the extent to which this amount will make the alleged victims and industry professionals whole. Some of Hollywood’s more famous actors, directors, producers, and writers were skeptical and raised concerns about the private equity firm’s willingness to satisfy TWC’s contractual obligations.
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